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Container Shipping & Trade

Container Shipping & Trade

Consolidation is ’destabilising’ container shipping market

Fri 13 Apr 2018 by Rebecca Moore

Consolidation is ’destabilising’ container shipping market

Market consolidation has not reduced volatility, maritime consultancy SeaIntel said.

SeaIntel has analysed the impact of consolidation on volatility – it took a closer look at market volatility out of Asia, based on the CCFI rate index which encompasses both contract and spot rate data, over the past 20 years. In Q1, Q2 and Q4 it said there has been a gradual increase in volatility – most clearly in Q1 and Q2.

It added “During the full 20-year period we have in fact seen a tripling of the level of rate volatility in Q1 and a doubling in Q2 and Q4. Only Q3 has not seen a marked change in volatility… the underlying Q3 trend is in practice flat. Hence the data clearly shows that whereas market volatility is in essence unchanged in the peak season, it has been going up sharply off-peak, and especially the developments in Q1 around Chinese New Year has become much more volatile.”

An explaining factor is that in the path towards consolidation, it “becomes increasingly important for the main carriers to maintain and grow their market share”. But as the markets become more commoditised, increasingly freight rates become the most important tool with which to accomplish this objective – in turn driving volatility upwards.

Commenting on the data, SeaIntel chief executive Alan Murphy said “Consolidation is indeed seen as necessary in order to stabilise the markets – but the path leading to a critical mass of consolidation has the counter-intuitive effect of actually destabilising the markets.”

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